As $30 trillion makes its way from baby boomers to the next generations over the coming decades, many advisory firms risk seeing their managed assets slip from their grasp as clients’ beneficiaries take their money elsewhere.
Here are the facts: 66% of children fire their parents’ financial advisors after receiving an inheritance. On average, only 50% of the wealthy intend to introduce their family to their advisor. Only 20% of advisors are targeting family members of clients. The top reason advisors can’t retain clients’ assets passed to heirs is lack of a relationship.
Even advisors who believe their personal and professional relationships with clients couldn’t be stronger are likely leaving relationships untapped and assets on the table. They’re relying on clients to form relationships with beneficiaries on their behalf, but this generation is savvy and they won’t stick with their parents’ advisors just for intergenerational loyalty. Advisors need to form their own connections, and most are failing to seize the opportunity to develop a solid relationship with their clients’ beneficiaries.
Are You Ready for the Great Wealth Transfer?
Given the enormous quantity of assets at stake in this impending transfer, no amount of preparation is unwarranted. Fortunately, solutions requiring very little time and effort exist. You don’t need to offer perks or host events to cultivate extended networks. Nor must you set up quarterly meetings with every family member. Rather, simple, sustained communication and relationship-building with the next generation of clients is all that is needed.
A 2013 Vanguard study found that you’re more likely to retain assets under management when you get to know your clients’ beneficiaries before a major event occurs. More often than not, recipients of an inheritance leave assets with their benefactor’s advisor for about a year. In that time, if no counsel is offered and no meaningful relationship is established, the inheritors take their assets to the first wealth advisor who fills this need. The writers of the study recommend beginning relationships now so that you’re already a trusted figure through difficult times.
Using Digital Communications to Connect With Clients’ Beneficiaries
Younger investors are looking for more direction and have questions about the future, but many rely on robo-advisors or their own research and methods instead. Of primary concern is the responsibility they feel for the well-being of their aging parents. This is an excellent opportunity to spark a lasting relationship with your clients’ children. Involve them in life planning discussions to alleviate uncertainties and establish yourself as a knowledgeable, trusted figure.
Additionally, advisors are hesitant to engage a generation that prefers digital relationships to the traditional methods of interaction preferred by their parents. Advisors who have spent years relying on in-person meetings and phone calls don’t know how best to bridge the communication gap with millennials and Gen Xers. However, the solution is quite simple: Place your expertise and services in front of them where they are – email and social media – and do so consistently.
A simple email is all it takes. In your next client newsletter, focus on topics relevant to clients and their children like estate planning, elder care, and wealth transfer. Encourage your clients to forward the email to their children or other beneficiaries. You’ve just begun a digital relationship with your clients’ beneficiaries; you’ve engaged them on the channels they prefer, you’ve offered value in the form of educational content, and your name has been referred by a parent they trust.
Phil Henry of Henry Wealth Management – a client of my firm, Vestorly – spent 30 years acquiring clients the old fashioned way: meeting people, spending time with them and developing lasting relationships. He took the time to get to know every one of his clients, but now that he’s secure with his older clients, he wants to cultivate similar lasting relationships with their children, too. He thinks of digital communication as the beginning to real relationships. “Now at the end of the day you still have to look somebody in the eye, shake their hand and build trust. If you can get in front of more people and motivate them to personally meet with you through an initial electronic meet, which is more catered to younger persons, that’s great.”
Young professional children of Henry’s clients often do not yet have financial advisors because they don’t have the means, but soon they’ll have both the means and the needs. They will also have their college friends who have entered the financial advisory business desiring to give them advice. In order to maintain a top-of-mind position, Henry adds these younger contacts to his distribution list. “Now they’re getting my communications and we’re building a relationship, even though I’m not meeting with them just yet for planning purposes. If I at least maintain contact, if and when a lump sum inheritance or a rollover becomes available, there’s a much bigger chance they’ll want to work with our firm.”
Positioning Yourself for the Future
Connect with your clients’ beneficiaries digitally by sharing engaging, personalized and educational content with them. If you can turn them into loyal consumers of your content by becoming a valued information resource for them online, you’ll find that a real-world relationship naturally follows.
Try this: Create another regular newsletter just for the beneficiaries of your clients. Maintain the digital communication you initiated through their parents with a consistent email presence. Share content relevant to the needs of a younger generation along with information on the value of wealth managers and your firm’s services. When the time is right and you’ve strengthened your digital relationship, take it offline with a meeting or phone call.
Many advisors who work exclusively with baby boomers hesitate to embrace digital communications because they know their clients don’t have social media accounts and ignore incoming emails. It may be the case that some of your clients aren’t proactively looking for valuable content online, but you can be sure that their children are. You may be missing a valuable opportunity to position yourself as a visible, informed figure who leverages the most cutting-edge digital technology to serve personalized insights to current and future clients.
Absent forethought and timely preparation, it is more likely than not that your clients’ assets will not remain under your firm’s management in the coming years and decades. The opportunity to advise the next generation of wealth management clients is well within your grasp.